Shipyard Leader's Shares At 18,013

NEWPORT NEWS — Stocks and stock options awarded to Mike Petters are designed to keep him with Northrop Grumman.

Northrop Grumman Newport News president Mike Petters received 6,500 shares of restricted stock and 20,000 stock options when he took the helm of the shipyard on Nov. 1, according to a company filing with the Securities and Exchange Commission.

Together with shares and options he owned previously, the payout brought the total number of restricted and unrestricted shares he owned to 18,013 and the total number of stock options he owned to 50,000.

The 18,013 shares would be worth $953,247 based on Monday's closing stock price of $52.92, but their worth will rise and fall with the market in the coming years.

Most of the 18,013 shares -- including the 6,500 that he received upon becoming president -- will transfer to Petters only if he stays with Northrop until key dates between now and the end of 2007.

"The structure creates stability and provides incentives for key executives to remain with the company," explained Frank Moore, director of communications for Los Angeles-based Northrop.

Petters also received 20,000 stock options, on top of the 30,000 stock options he already owned, the filing showed.

The stock options, the majority of which cannot yet be exercised and some which don't yet have any value, would be worth $80,880 if they could be converted today. But they have the potential to be worth far more if Northrop Grumman's share price grows at a modest clip over the next ten years.

The 20,000 shares he received on becoming president, for example, would be worth $1.17 million by their 2014 expiration date, assuming Northrop's stock price grows by 8 percent a year and reaches $111.50 a share.

Assuming the same growth rate, the 30,000 shares Petters owned previously would be worth $1.4 million when they expire at various points in 2012, 2013 and 2014.

The options could be worth far more with a higher growth rate, but could have no worth whatsoever if the company's stock price languishes and falls slightly from its current level.

Petters, 44, most recently the vice president of human resources, administration and trades, was praised with helping the company come to terms with the United Steelworkers of America's Local 8888, the shipyard's main union. He replaced Thomas C. Schievelbein, who decided to step down last fall to spend more time with his family and devote more time to personal interests.

Northrop Grumman does not disclose Petters' salary.

SEC rules require that publicly traded companies disclose the salaries of only their five highest paid officers. Although Petters is the highest ranking official at the Newport News shipyard -- and presumably its highest paid -- his salary doesn't rank him among the top five earners at Northrop Grumman, the nation's third largest defense contractor.

Of the 18,013 shares of Northrop that Petters owned or had rights to on Nov. 1, most of it -- 16,500 shares -- came in the form of long-term incentives requiring him to stay with the company until key dates between Dec. 31, 2004, and Dec. 31, 2007, according to the filing. Another 929 shares were in a company profit-sharing plan, with the remaining 584 shares owned outright. *